States Show the Folly of Regulating Health Care

The Washington Times, Opinion/Editorial



The health care reform freight train is steaming through Congress once again, with members poised to vote on legislation imposing new regulations on America’s health-care industry. If the experience of the states is any indication, these regulations could backfire, harming the very citizens they were designed to help.

Between 1990 and 1994, 16 states were most aggressive in passing laws regulating health insurance. The purpose in most cases was to boost access to health coverage for the uninsured – a laudable goal, to be sure. But by 1996, these 16 states were seeing their uninsured populations grow an average of EIGHT times faster than the 34 states that passed less comprehensive regulations. Compare this to 1990, before the blizzard of health-care reform legislation began, when the two groups of states had nearly equal rates of growth.

Could the increase in the number of uninsured in these 16 states be caused by something other than regulation? Not likely. The regulating states had employment and income characteristics similar to the rest of the nation. Their only distinguishing feature was the passage of these sweeping health-insurance regulations. 

One of the biggest regulators was Kentucky. “In spite of good intentions and noble purpose, it didn’t work … The entire cost of the system went up,” says Gov. Paul Patton. Kentucky citizens paid the price: 107,500 fewer citizens, out of a population of 3.4 million, had health insurance in 1996 than in 1990. “In my opinion, most of the general assembly believes that we in Kentucky have experimented enough for the time being,” Patton says. 

In addition to Kentucky, the other states that imposed the most aggressive regulations were Idaho, Iowa, Louisiana, Maine, Minnesota, New Hampshire, New Jersey, New Mexico, New York, North Dakota, Ohio, Oregon, Utah, Vermont and Washington. Their new laws included: mandates on insurers to sell policies to anyone who applies and agrees to pay the premium – even if they wait to buy insurance until they are already sick (guaranteed issue); prohibitions on excluding coverage for some medical conditions (pre-existing condition exclusions); and requirements that insurers charge the same price to everyone in a community, regardless of the differences in risk posed by individuals (community rating); plus others.

The fact that regulation has failed at the state level does not mean federal action is unneeded. On the contrary, health care is a political time bomb, and unless conservatives address the underlying flaws in the system, they will be stuck fighting the encroachment of government-run health care for years to come.

But in this latest health-care battle, the uninsured are being shoved aside in favor of the small percentage of those who have health insurance but are unhappy with it. Instead of helping the 43 million Americans with no health insurance, patients’ rights legislation will hurt them. 

Why? Because the regulations Congress is contemplating will raise the costs of health insurance. The Congressional Budget Office estimates that every 1 percent increase in the cost of health insurance throws 200,000 more Americans off the insurance rolls (the CBO estimates the Democratic version of the legislation will raise costs by at least 4 percent). The result: Those who can least afford the inevitable premium increases will lose their health insurance.

Our study proved that was exactly what happened in the 16 states which implemented these comprehensive reforms. The result:



  • More citizens uninsured 
  • Fewer citizens covered by private insurance 
  • Fewer citizens covered by individual insurance. 

A Charlton Research Co. poll conducted early this year found that 66 percent of the American people think health care is regulated enough, and 60 percent say the biggest problem with the system is high costs. Now we have the prospect of Congress making both problems worse. 

Conservatives must face facts: The health-care market is not functioning properly, and it won’t until consumers are in charge of buying health insurance that they own and control themselves. Instead of creating more regulations, legislators should free the health sector from the shackles that frustrate consumers, drive up prices, and increase the number of uninsured. 

The key is tax reform that would allow individuals to buy their own health coverage and not depend on the coverage provided by their employer. Consumers could then transform the health sector into a true free market – one where insurance companies compete for consumer dollars and health-care providers are accountable to individuals and families, not regulators.

The patients’ bill of rights will take the country in the opposite direction, which is too bad because the professional code for policy-makers should be the same as it is for physicians: “First, do no harm.”



Note: This essay by Grace-Marie Arnett and Melinda Schriver, respectively the president and senior research associate of the Galen Institute, is adapted from their forthcoming study to be published by The Heritage Foundation.

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The Washington Times, Opinion/Editorial



The health care reform freight train is steaming through Congress once again, with members poised to vote on legislation imposing new regulations on America’s health-care industry. If the experience of the states is any indication, these regulations could backfire, harming the very citizens they were designed to help.

Between 1990 and 1994, 16 states were most aggressive in passing laws regulating health insurance. The purpose in most cases was to boost access to health coverage for the uninsured – a laudable goal, to be sure. But by 1996, these 16 states were seeing their uninsured populations grow an average of EIGHT times faster than the 34 states that passed less comprehensive regulations. Compare this to 1990, before the blizzard of health-care reform legislation began, when the two groups of states had nearly equal rates of growth.

Could the increase in the number of uninsured in these 16 states be caused by something other than regulation? Not likely. The regulating states had employment and income characteristics similar to the rest of the nation. Their only distinguishing feature was the passage of these sweeping health-insurance regulations. 

One of the biggest regulators was Kentucky. “In spite of good intentions and noble purpose, it didn’t work … The entire cost of the system went up,” says Gov. Paul Patton. Kentucky citizens paid the price: 107,500 fewer citizens, out of a population of 3.4 million, had health insurance in 1996 than in 1990. “In my opinion, most of the general assembly believes that we in Kentucky have experimented enough for the time being,” Patton says. 

In addition to Kentucky, the other states that imposed the most aggressive regulations were Idaho, Iowa, Louisiana, Maine, Minnesota, New Hampshire, New Jersey, New Mexico, New York, North Dakota, Ohio, Oregon, Utah, Vermont and Washington. Their new laws included: mandates on insurers to sell policies to anyone who applies and agrees to pay the premium – even if they wait to buy insurance until they are already sick (guaranteed issue); prohibitions on excluding coverage for some medical conditions (pre-existing condition exclusions); and requirements that insurers charge the same price to everyone in a community, regardless of the differences in risk posed by individuals (community rating); plus others.

The fact that regulation has failed at the state level does not mean federal action is unneeded. On the contrary, health care is a political time bomb, and unless conservatives address the underlying flaws in the system, they will be stuck fighting the encroachment of government-run health care for years to come.

But in this latest health-care battle, the uninsured are being shoved aside in favor of the small percentage of those who have health insurance but are unhappy with it. Instead of helping the 43 million Americans with no health insurance, patients’ rights legislation will hurt them. 

Why? Because the regulations Congress is contemplating will raise the costs of health insurance. The Congressional Budget Office estimates that every 1 percent increase in the cost of health insurance throws 200,000 more Americans off the insurance rolls (the CBO estimates the Democratic version of the legislation will raise costs by at least 4 percent). The result: Those who can least afford the inevitable premium increases will lose their health insurance.

Our study proved that was exactly what happened in the 16 states which implemented these comprehensive reforms. The result:



  • More citizens uninsured 
  • Fewer citizens covered by private insurance 
  • Fewer citizens covered by individual insurance. 

A Charlton Research Co. poll conducted early this year found that 66 percent of the American people think health care is regulated enough, and 60 percent say the biggest problem with the system is high costs. Now we have the prospect of Congress making both problems worse. 

Conservatives must face facts: The health-care market is not functioning properly, and it won’t until consumers are in charge of buying health insurance that they own and control themselves. Instead of creating more regulations, legislators should free the health sector from the shackles that frustrate consumers, drive up prices, and increase the number of uninsured. 

The key is tax reform that would allow individuals to buy their own health coverage and not depend on the coverage provided by their employer. Consumers could then transform the health sector into a true free market – one where insurance companies compete for consumer dollars and health-care providers are accountable to individuals and families, not regulators.

The patients’ bill of rights will take the country in the opposite direction, which is too bad because the professional code for policy-makers should be the same as it is for physicians: “First, do no harm.”



Note: This essay by Grace-Marie Arnett and Melinda Schriver, respectively the president and senior research associate of the Galen Institute, is adapted from their forthcoming study to be published by The Heritage Foundation.

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About the author